[House Report 112-265]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    112-265

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   PROVIDING FOR CONSIDERATION OF THE BILL (H.R. 2930) TO AMEND THE 
  SECURITIES LAWS TO PROVIDE FOR REGISTRATION EXEMPTIONS FOR CERTAIN 
   CROWDFUNDED SECURITIES, AND FOR OTHER PURPOSES, AND PROVIDING FOR 
  CONSIDERATION OF THE BILL (H.R. 2940) TO DIRECT THE SECURITIES AND 
   EXCHANGE COMMISSION TO ELIMINATE THE PROHIBITION AGAINST GENERAL 
SOLICITATION AS A REQUIREMENT FOR A CERTAIN EXEMPTION UNDER REGULATION 
                                   D

                                _______
                                

  November 2, 2011.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

   Mr. Sessions, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 453]

    The Committee on Rules, having had under consideration 
House Resolution 453, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration of H.R. 2930, the 
Entrepreneur Access to Capital Act, under a structured rule. 
The resolution provides one hour of general debate equally 
divided and controlled by the chair and ranking minority member 
of the Committee on Financial Services. The resolution waives 
all points of order against consideration of the bill. The 
resolution provides that the amendment in the nature of a 
substitute recommended by the Committee on Financial Services 
now printed in the bill shall be considered as original text 
for the purpose of amendment and shall be considered as read. 
The resolution waives all points of order against the committee 
amendment in the nature of a substitute. The resolution makes 
in order only those further amendments to H.R. 2930 printed in 
part A of this report. Each such amendment may be offered only 
in the order printed in this report, may be offered only by a 
Member designated in this report, shall be considered as read, 
shall be debatable for the time specified in this report 
equally divided and controlled by the proponent and an 
opponent, shall not be subject to amendment, and shall not be 
subject to a demand for division of the question in the House 
or in the Committee of the Whole. The resolution waives all 
points of order against the amendments printed in part A of 
this report. The resolution provides one motion to recommit 
H.R. 2930 with or without instructions.
    The resolution further provides for consideration of H.R. 
2940, the Access to Capital for Job Creators Act, under a 
structured rule. The resolution provides one hour of debate 
equally divided and controlled by the chair and ranking 
minority member of the Committee on Financial Services. The 
resolution waives all points of order against consideration of 
the bill. The resolution provides that the amendment in the 
nature of a substitute recommended by the Committee on 
Financial Services now printed in the bill shall be considered 
as adopted, and the bill, as amended, shall be considered as 
read. The resolution waives all points of order against the 
provisions in the bill, as amended. The resolution makes in 
order the further amendment to H.R. 2940 printed in part B of 
this report, if offered by Representative Miller of North 
Carolina or his designee, which shall be considered as read and 
shall be separately debatable for 10 minutes equally divided 
and controlled by the proponent and an opponent. The resolution 
waives all points of order against the amendment printed in 
part B of this report. Finally, the resolution provides one 
motion to recommit H.R. 2940 with or without instructions.

                         EXPLANATION OF WAIVERS

    The waiver of all points of order against consideration of 
H.R. 2930 includes a technical waiver of clause 2(h) of rule 
XI, which prohibits a committee from improperly reporting a 
measure without a quorum present. The Committee on Financial 
Services did not formally order the measure reported because 
the chair did not properly put the question on reporting the 
measure to the committee.
    Although the rule waives all points of order against the 
committee amendment in the nature of a substitute, the 
Committee is not aware of any points of order. The waiver is 
prophylactic in nature.
    Although the rule waives all points of order against the 
amendments printed in part A of this report, the Committee is 
not aware of any points of order. The waiver is prophylactic in 
nature.
    Although the rule waives all points of order against 
consideration of H.R. 2940, the Committee is not aware of any 
points of order. The waiver is prophylactic in nature.
    Although the rule waives all points of order against 
provisions in the bill, as amended, the Committee is not aware 
of any points of order. The waiver is prophylactic in nature.
    Although the rule waives all points of order against the 
amendment printed in part B of this report, the Committee is 
not aware of any points of order. The waiver is prophylactic in 
nature.

                            COMMITTEE VOTES

    The results of each record vote on an amendment or motion 
to report, together with the names of those voting for and 
against, are printed below:

Rules Committee record vote No. 145

    Motion by Mr. McGovern to report an open rule for both H.R. 
2930 and H.R. 2940. Defeated: 3-7.

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                Majority Members                      Vote               Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions....................................          Nay   Mr. McGovern......................          Yea
Ms. Foxx........................................          Nay   Mr. Hastings of Florida...........          Yea
Mr. Bishop of Utah..............................          Nay   Mr. Polis.........................          Yea
Mr. Nugent......................................          Nay
Mr. Scott of South Carolina.....................          Nay
Mr. Webster.....................................          Nay
Mr. Dreier, Chairman............................          Nay
----------------------------------------------------------------------------------------------------------------

             SUMMARY OF AMENDMENTS IN PART A MADE IN ORDER

    1. McHenry (NC): Would make technical corrections. Would 
also require the issuer to state a target offering amount and a 
deadline to reach the target offering amount. Would require 
that the Securities and Exchange Commission is provided a 
notice upon completion of the offering, which shall include the 
aggregate offering amount and the number of purchasers. Would 
clarify the disqualification provision to ensure that both 
issuers and intermediaries, as well as their predecessors, 
affiliates, officers, directors, or persons fulfilling similar 
roles, are disqualified from the exemption established in this 
bill should they have a history of committing securities fraud. 
(10 minutes)
    2. Fincher (TN), Sherman (CA): Would index to inflation the 
$1 million and $2 million aggregate annual amounts raised 
through the issue of the securities as authorized in the bill. 
The index for inflation would be measured by the annual change 
in the Consumer Price Index for All Urban Consumers published 
by the Bureau of Labor Statistics. (10 minutes)
    3. Quayle (AZ): Would index the $10,000 individual 
investment cap to inflation. (10 minutes)
    4. Velazquez (NY): Would require crowdfunding 
intermediaries to disclose their method of compensation to 
potential investors. (10 minutes)
    5. Barrow (GA): Would require the Commission to establish a 
website that provides the public with crowdfunding website 
safety tips for investing in securities described under section 
4(6). (10 minutes)
    6. Perlmutter (CO), McHenry (NC): Would preserve a state's 
right to enforce securities laws with respect to fraud, deceit 
or unlawful conduct. (10 minutes)

              SUMMARY OF AMENDMENT IN PART B MADE IN ORDER

    Miller, Brad (NC): Would require disclosure of bonus 
compensation structures and ``golden parachute'' arrangements 
in advertising materials associated with an exempted offering. 
(10 minutes)

                PART A--TEXT OF AMENDMENTS MADE IN ORDER

   1. An Amendment To Be Offered by Representative McHenry of North 
           Carolina or His Designee, Debatable for 10 Minutes

  Page 5, line 5, strike ``issuance'' and insert ``offer or 
sale''.
  Page 5, line 6, strike ``for which'' and insert ``by an 
issuer, provided that''.
  Page 5, beginning on line 7, strike ``annual amount raised 
through the issue of the securities'' and insert ``amount sold 
within the previous 12-month period in reliance upon this 
exemption''.
  Page 5, beginning on line 13, strike ``individual investments 
in the securities are limited to an aggregate annual amount 
equal to'' and insert ``the aggregate amount sold to any 
investor in reliance on this exemption within the previous 12-
month period does not exceed''.
  Page 5, line 17, strike ``the'' and insert ``such''.
  Page 6, line 8, strike ``issuance'' and insert ``offer or 
sale''.
  Page 6, line 12, after ``website'' insert ``used for the 
offer and sale of such securities''.
  Page 6, line 24, strike ``person'' and insert 
``intermediary''.
  Page 7, line 4, strike ``competency in''.
  Page 7, line 5, strike ``recognition'' and insert ``an 
understanding''.
  Page 7, line 8, before ``risk'' insert ``an understanding of 
the''.
  Page 7, line 10, before the semicolon insert ``by rule or 
regulation''.
  Page 7, strike lines 11 through 15 and insert the following:
          ``(7) requires the issuer to state a target offering 
        amount and a deadline to reach the target offering 
        amount and ensure the third party custodian described 
        under paragraph (10) withholds offering proceeds until 
        aggregate capital raised from investors other than the 
        issuer is no less than 60 percent of the target 
        offering amount;''.
  Page 7, line 18, strike ``with basic'' and insert ``and 
potential investors with''.
  Page 7, beginning on line 19, strike ``funds are solicited 
from'' and insert ``securities are offered to''.
  Page 8, line 2, strike ``capital formation funds'' and insert 
``proceeds of the offering''.
  Page 8, line 4, before the semicolon insert ``and the 
deadline to reach the target offering amount''.
  Page 8, beginning on line 6, strike ``traditional broker or 
dealer or'' and insert ``broker or dealer registered under 
section 15(b)(1) of the Securities Exchange Act of 1934 or 
an''.
  Page 8, line 13, strike ``and'' and insert after such line 
the following:
          ``(13) provides the Commission with a notice upon 
        completion of the offering, which shall include the 
        aggregate offering amount and the number of purchasers; 
        and''.
  Page 8, line 14, strike ``(13)'' and insert ``(14)''.
  Page 8, line 17, before ``securities'' insert ``or sells''.
  Page 9, line 13, strike ``competency in''.
  Page 9, line 14, strike ``recognition'' and insert ``an 
understanding''.
  Page 9, line 17, before ``risk'' insert ``an understanding of 
the''.
  Page 9, line 19, before the semicolon insert ``by rule or 
regulation''.
  Page 9, beginning on line 20, strike ``withholds capital 
formation'' and insert ``ensures that the third party custodian 
described under paragraph (9) withholds offering''.
  Page 10, line 1, strike ``basic''.
  Page 10, beginning on line 2, strike ``funds are solicited 
from'' and insert ``securities are offered to''.
  Page 10, line 5, strike ``capital formation funds'' and 
insert ``proceeds of the offering''.
  Page 10, line 7, before the semicolon insert ``and the 
deadline to reach the target offering amount''.
  Page 10, beginning on line 9, strike ``traditional broker or 
dealer or'' and insert ``broker or dealer registered under 
section 15(b)(1) of the Securities Exchange Act of 1934 or 
an''.
  Page 10, line 16, strike ``and'' and insert after such line 
the following:
          ``(13) provides the Commission with a notice upon 
        completion of the offering, which shall include the 
        aggregate offering amount and the number of purchasers; 
        and''.
  Page 10, line 17, strike ``(13)'' and insert ``(14)''.
  Page 10, line 22, strike ``provided by an investor'' and 
insert ``as to annual income provided by the person to whom the 
securities are sold''.
  Page 11, line 1, strike ``(a)(9) and (b)(8)'' and insert 
``(a)(9), (a)(13), (b)(8), and (b)(13)''.
  Page 11, line 5, strike ``an investor may not sell'' and 
insert ``a purchaser may not transfer''.
  Page 11, strike lines 11 through 15 and insert the following:
          ``(1) No registration as broker.--With respect to a 
        transaction described under section 4(6) involving an 
        intermediary, such intermediary shall not be required 
        to register as a broker under section 15(a)(1) of the 
        Securities Exchange Act of 1934 solely by reason of 
        participation in such transaction.''.
  Page 11, line 21, strike ``90'' and insert ``180''.
  Page 12, beginning on line 1, strike ``carry out the cost-
benefit analysis required under section 2(b) of such Act'' and 
insert ``consider the costs and benefits of the action''.
  Page 12, line 3, strike ``90'' and insert ``180''.
  Page 12, line 6, strike ``a person'' and insert ``an 
issuer''.
  Page 12, beginning on line 8, strike ``or to participate in 
the affairs of an intermediary facilitating the use of that 
exemption.'' and insert ``based on the disciplinary history of 
the issuer or its predecessors, affiliates, officers, 
directors, or persons fulfilling similar roles. The Commission 
shall also establish disqualification provisions under which an 
intermediary shall not be eligible to act as an intermediary in 
connection with an offering utilizing the exemption under 
section 4(6) of the Securities Act of 1933 based on the 
disciplinary history of the intermediary or its predecessors, 
affiliates, officers, directors, or persons fulfilling similar 
roles.''.
  Page 13, beginning on line 1, strike ``the term `held of 
record' shall not include holders of securities issued pursuant 
to transactions described under section 4(6) of the Securities 
Act of 1933.'' and insert ``securities held by persons who 
purchase such securities in transactions described under 
section 4(6) of the Securities Act of 1933 shall not be deemed 
to be `held of record'.''.
                              ----------                              


2. An Amendment To Be Offered by Representative Fincher of Tennessee or 
                 His Designee, Debatable for 10 Minutes

  Page 5, line 9, insert after ``$1,000,000'' the following: 
``, as such amount is adjusted by the Commission to reflect the 
annual change in the Consumer Price Index for All Urban 
Consumers published by the Bureau of Labor Statistics,''.
  Page 5, line 12, insert after ``$2,000,000'' the following: 
``, as such amount is adjusted by the Commission to reflect the 
annual change in the Consumer Price Index for All Urban 
Consumers published by the Bureau of Labor Statistics,''.
                              ----------                              


 3. An Amendment To Be Offered by Representative Quayle of Arizona or 
                 His Designee, Debatable for 10 Minutes

  Page 5, line 16, insert before the semicolon the following: 
``, as such amount is adjusted by the Commission to reflect the 
annual change in the Consumer Price Index for All Urban 
Consumers published by the Bureau of Labor Statistics''.
                              ----------                              


 4. An Amendment To Be Offered by Representative Velazquez of New York 
               or Her Designee, Debatable for 10 Minutes

  Page 8, line 13, strike ``and''.
  Page 8, line 14, strike the period and insert ``; and''.
  Page 8, after line 14, insert the following:
          ``(14) discloses to potential investors the 
        intermediary's compensation structure for participation 
        in the security offering.''.
                              ----------                              


 5. An Amendment To Be Offered by Representative Barrow of Georgia or 
                 His Designee, Debatable for 10 Minutes

  Page 11, after line 9, insert the following:
      ``(f) Website for Crowdfunding Investment Safety Tips.--
          ``(1) In general.--The Commission shall establish a 
        website that provides the public with safety tips for 
        investing in securities described under section 4(6).
          ``(2) Links to website.--The intermediary in a 
        transaction involving the issuance of securities 
        described under section 4(6) or, in the case of such 
        transaction not involving an intermediary, the issuer, 
        shall place a link to the website described under 
        paragraph (1) in a prominent location on the main page 
        of the website of such intermediary or issuer that is 
        used to facilitate such transaction.''.
  Page 11, line 10, strike ``(f)'' and insert ``(g)''.
                              ----------                              


6. An Amendment To Be Offered by Representative Perlmutter of Colorado 
               or His Designee, Debatable for 10 Minutes

  In section 4, strike ``Section'' and insert the following:
  (a) In General.--Section
  In section 4, add at the end the following:
  (b) Clarification of the Preservation of State Enforcement 
Authority.--
          (1) In general.--The amendments made by subsection 
        (a) relate solely to State registration, documentation, 
        and offering requirements, as described under section 
        18(a) of Securities Act of 1933 (15 U.S.C. 77r(a)), and 
        shall have no impact or limitation on other State 
        authority to take enforcement action with regard to an 
        issuer, intermediary, or any other person or entity 
        using the exemption from registration provided by 
        section 4(6) of such Act.
          (2) Clarification of state jurisdiction over unlawful 
        conduct of intermediaries, issuers, and custodians.--
        Section 18(c)(1) of the Securities Act of 1933 is 
        amended by striking ``with respect to fraud or deceit, 
        or unlawful conduct by a broker or dealer, in 
        connection with securities or securities 
        transactions.'' and inserting the following: ``, in 
        connection with securities or securities transactions, 
        with respect to--
                  ``(A) fraud or deceit;
                  ``(B) unlawful conduct by a broker or dealer; 
                and
                  ``(C) with respect to a transaction described 
                under section 4(6), unlawful conduct by an 
                intermediary, issuer, or custodian.''.

                PART B--TEXT OF AMENDMENT MADE IN ORDER

 An Amendment To Be Offered by Representative Miller of North Carolina 
               or His Designee, Debatable for 10 Minutes

  Page 4, line 9, insert before the period the following: ``and 
the person offering or selling such securities utilizing the 
general advertising or general solicitation permitted by such 
rules discloses in any advertising materials connected with 
such offering or selling any bonus compensation structures and 
`golden parachute' severance packages that the person has 
provided to executive officers, directors, or other principals 
of the person''.

                                  
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